The BSE Sensex has gained 14.7 per cent in the past three months between March and May, which is also the highest among its peers as global investors have chosen to put their buck on a Narendra Modi-led BJP government with a pro-growth outlook. Brazil's Ibovespa Index gained 8.8 per cent while Russia's Micex Index and China's Shanghai composite Index stayed flat in the same period.

"Foreign investors have turned bullish on expectations of a speedy recovery of the Indian economy. I expect strong momentum of foreign fund flows into India to continue for some time," said Nirmal Jain, chairman at IIFL.

Interestingly, ETFs tracking the MSCI India Index, have received fund flows worth $401 million in the past three months, and have surpassed regional peers during the same period. FTSE China 25 ETF has seen outflows of $928 million, Hang Seng ETF has seen withdrawal of $267 million by investors, MSCI BRIC ETF witnessed outflows of $47 million, while MSCI Emerging Market ETF has seen marginal outflow of $4 million during the same period.

Analysts say the Union Budget will determine the next round of fund flows into India. "India is back on investors' radar — both international and domestic. The Budget by the new government will now further determine the course of the markets," said Rashesh Shah, chairman and group CEO at Edelweiss Financial Services.

Some of the leading India-focused ETFs have outperformed the markets: WisdomTree India Earnings Fund ETF has surged 27.10 per cent in the past three months, Lyxor ETF MSCI India has gained 17.9 per cent, iShares MSCI India Index ETF has risen 17.6 per cent, while the benchmark index, BSE Sensex, has gained 14.7 per cent over the same period.

"We could probably see the flows accelerating after the budget, that's the next big milestone which investors are looking at," said Abhay P Laijawala, managing director and head of research at Deutsche Equities India.

Global emerging market (GEM) funds allocation to India was 10 per cent higher in April 2014 as these funds preferred India and Brazil to China in recent times. Fund managers expect strong global allocation of funds into India to continue.

"Many global portfolio managers have turned overweight on India and this is likely to further strengthen ETF flows into India. The change in political landscape has boosted investor confidence," said Rajesh Cheruvu, chief investment officer, RBS Private Banking.

Meanwhile, India has received FII flows worth over $8.5 billion so far this year, which is the highest among its peers. Brazil has seen flows worth $5 billion, South Korea has received $2.17 billion and South Africa managed over $1.89 billion during the same time.